New Study Confirms: Internet Is Contributing To Massive Profit Levels At Legacy Entertainment Firms

from the sky-is-rising dept

Our own research has shown this over the past few years, but contrary to the doom-and-gloom stories from the big entertainment companies about how awful the internet has been for their business, the truth is that it’s enabling tremendous growth and profits. A few months ago, a study of the major record labels showed that they remained tremendously profitable.

There’s some up and down in there, but there’s fairly consistent profitability, with pretty massive profitability from the two biggest ones, Universal Music and Sony. The report also notes a big increase in the profit margins that these companies are making, able to squeeze a lot more money out of existing resources.

A new, much larger, study from Ernst & Young shows that this is true across the media business these days — and that a lot of the profitability is coming… from the internet. A quote from the report’s lead author sums it up:

?We are seeing that digital is very much driving profits now, instead of disrupting it. Companies are figuring out how to monetize the migration of consumers to a variety of digital platforms, and this insatiable demand for content is fueling growth throughout the industry.?

Remember how the internet was supposedly killing music? Yeah, about that:

The music sector is driving record growth in profitability from the expansion of licensed digital subscription and streaming services, growth in music publishing and rising smartphone and tablet penetration in emerging markets.


Film and TV production companies are driving their profitability through increasing revenues from digital platforms and investments in franchise-based films and higher-margin television shows.

But, wait, just weeks ago, one of the copyright maximalist talking heads was telling us that franchise movies were being killed off due to piracy? Maybe not.

Either way, this goes back to the point that many of us made during the SOPA fight. Despite the desire of Hollywood and certain politicians to make this into a “fight” of Hollywood vs. Silicon Valley, it’s a bizarre kind of “fight” when it’s Silicon Valley providing all the “weapons” to Hollywood that’s making them so profitable.

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Comments on “New Study Confirms: Internet Is Contributing To Massive Profit Levels At Legacy Entertainment Firms”

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Anonymous Coward says:

and in typical fashion, it still isn’t enough for them and they want to control all the internet, thereby maximising their profits! why else do people think the industries have spent millions of dollars trying to get the laws in place that they want? why else do people think that the industries are doing all they can to get people kicked off the internet, get them massive fines, split up families, cause bankruptcy yo ordinary people who had very little to start with, want to get as many thrown into jail as possible? to scare the shit out of people so the industries can just slide in and take over the ‘net, whilst giving governments information they want from the new laws allowing the industries to spy on and track who is on the ‘net what sites they visit and what the do as far as downloading/uploading is concerned. it’s all one massive conspiracy and governments are in cahoots with the entertainment industries! just think about what is going on, how long it has been going on and what the industries have actually gained so far! unless there were an underlying objective, an idiot wouldn’t have done what these fuckers have. they would have packed up years ago! and all advice as to giving customers what they want has been thrown out every time! all the surveys, other than the ones the industries have paid for, have been thrown out as well. if an industry were truly desperate, was losing enormous amounts of money every year, wouldn’t they do something that improved the situation? every sane industry would but these do nothing except keep complaining and politicians being more worried about their own bank balances improving and being as thick as hell do whatever Hollywood and the ilk says!! bloody disgraceful way for governments to behave when they know what should be done!!

Anonymous Coward says:

Re: Re:

Sure it can; it costs them billions in imagined profits. I seem to recall someone crunching the numbers a few years back, projecting what would happen if the entertainment copyright lobby actually GOT the money they said was owed them — basically, the US economy would collapse, then trade agreements would fail, and the entertainment industry would fold before the US economy recovered.

That’s what happens when you think people owe you 40% of the nation’s GDP.

Anonymous Coward says:

Re: Re:

Yeah… What the hell is that guy smoking?

“…after reaching a peak in 2000, the music industry now earns half the money, having lost over $7 billion of revenue and more than half its value since the dawn of the Internet.”
No doubt.
Also “…but it was the next move, from ownership to streaming, that really killed an industry”. Yup. Makes total sense. Keeping with the times (dragged by the hair, kicking and screaming) killed music. Mystery solved!

Anonymous Coward says:

Re: Re: Re:6 Re:

I think it’s funny how they spend all their time whining and screaming about how they’re dying and yet manage to handsomely pay off their own gang of extortionists.

For fuck’s sake, Cary Sherman and Mitch Bainwol get ever-increasing bonuses, every year. Why? Who the hell pays someone for failing at their job?

Cutting contributions to the RIAA isn’t going to garner sympathy. It simply convinces others that labels need to skim the fat on a lot of useless expenses.

Anonymous Coward says:

Re: Re:

I like that it opens with the following.

“Editor’s note: Tom Goodwin is the founder of Tomorrow Group, a marketing and advertising consultancy for the post-digital age.”

Also, it’s interesting that it notes a number of companies who are failing to make a profit off really successful offerings (like Netflix), but fails to note that despite their success (from a number of users standpoint) they are also being taken to the cleaners once proven successful (by the legacy industries).

You gotta love how they do all this research into “the internet is killing everything” and yet they always miss that “the internet is saving everything, it’s the invested interests and companies that are killing the new things”.

Whatever (profile) says:

Re: Re: Re:2 Info

They show profits in the individual units when you don’t consider the costs of borrowed money, and other line items. When you read it all the way to the bottom, Warner in 2014 lost something like 127 million.

Cherry picking (look, this area is profitable) and ignoring the whole business is classic making the numbers be what you want them to be, I guess.

DannyB (profile) says:

The RIAA's and MPAA's response . . .

RIAA: Hear no evil. I can’t hear what you are saying. My fingers are in my ears. And I’m tone deaf. Being tone deaf is a qualification for being an executive in a field having to do with sound.

MPAA: See no evil. I can’t see your message. My hands are over my eyes. And I’m blind to things I don’t want to see and have limited vision and foresight. Being blind is a qualification for being an executive in a field having to do with motion pictures.

Chancius (user link) says:

Other Factors...

What this article doesn’t take into consideration is a multiple of factors that has turned the music industry around. The full on monopoly the major labels have over commercial radio, the ownership of Spotify, and 360 deals have all contributed to their success. Of course, this has all been for the worse because there is far less diversity of genres being invested and marketed while the music we do mostly get is simple and dumbed down to appeal to a small demographic (Tweens).

Anonymous Coward says:

The riaa ,music companys, etc attack all new technology ,
eg vcr,mp3 players,
digial downloading,
then wake up 1 day and realise they depend on new tech for
their profits.
Home video renting, buying videos ,did not exist before the vcr was invented .
All these new channels and netflix mean the film company,s
have new users to buy their films.
Valve don,t waste time complaining about piracy ,
they made a good platform that allows people to
buy games easily at a fair price .

Whatever (profile) says:

Yes, the profits look pretty good. However, dig a little deeper, and then compare it to the rhetoric around here, and you will realize that the reality is that these companies are doomed.

The problem here is that much of the revenue is from non-retail uses, which are based on the rules of copyright. Licensing music (now more than a third of the industry income) would be very much more difficult to do if the rules of copyright are tossed out.

If you look at the Warner statements, it’s clear that licensing / publishing represent a huge part of the business income. Toss that out or change those rules, and that income slides away.

JP Jones (profile) says:

Re: Re:

You’re absolutely right, these companies are doomed…but not because of piracy or the internet (directly). They’re doomed because they aren’t bothering to compete and instead crying to legislators to makes laws banning competition. That may result in a short term gain (possibly, but not likely) but they’re hemmoraging money on lawyers and lobbyists rather than spending that money to compete.

They’re making plenty of money…it’s not our fault they’re pissing it all away for no reason.

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