Global media and entertainment CEOs see digital media as a significant driver of future growth.

Global media and entertainment CEOs are optimistic about the digital future and expect digital revenue will be a rapidly increasing percentage of overall revenue for companies, according to Ernst & Young’s latest CEO study Opportunity and optimism: How CEOs are embracing digital growth. The report reveals that approximately half of all CEOs surveyed believe digital will increase their overall revenues and margins by at least 10% within the next three years.

The report is the result of surveys conducted with 34 CEOs from global media and entertainment companies with combined annual revenues exceeding US$300 billion. The companies have a broad geographic span and encompass a wide variety of media and entertainment subsectors, including filmed entertainment, television, music, electronic games, entertainment services, cable networks and channels, cable and satellite operators, internet and interactive media, advertising, publishing and conglomerates.

When we asked which technologies are driving this double-digit growth in digital, 79% of CEOs said tablets.

“CEOs are undeterred about the role digital will play in their futures,” said John Nendick, Global Media and Entertainment Leader at Ernst & Young. “There is a heightened optimism from a few years ago when industry leaders were more tentative about the potential of digital. All of the CEOs we spoke with understand that digital is probably the single most important factor – impacting their ability to grow both revenues and margins.”

Mobile devices to be the biggest driver of growth in content consumption

The report also addresses the impact of “digital ecosystems” through which consumers view and share content on a multitude of interconnected devices. Ecosystems are accelerating the ability for consumers to discover, choose and enjoy media, with media and entertainment companies bundling and marketing their products and services specifically for these individual digital ecosystems.

“The integration of media content, devices and networks creates self-sustaining digital ecosystems. The more users interact with content, the easier it is to learn about their habits and for content, advertising, and services within these ecosystems to evolve and grow,” said Howard Bass, Senior Partner, Global Media & Entertainment Advisory Services, Ernst & Young LLP.

When asked what will be the three biggest drivers of growth in content consumption during the next three years, CEOs were unanimous in their response. A full 100% believe mobile devices (including tablets) are the key to spurring demand for content. CEOs are especially bullish about emerging markets, where growing mobile device availability coupled with an improving wireless broadband infrastructure are creating significant opportunities for media companies to grow.

When queried about the greatest challenges facing the media and entertainment industry during the next three years, CEOs overwhelmingly agreed that global economic uncertainty and an inability to persuade consumers to pay fair value for digital content were the top two concerns. Also on the CEOs’ list was the elimination of intermediaries between their companies and the end-user, resulting in increased direct business-to-consumer relationships; structural and regulatory ambiguity; and reduction and/or reallocation of marketing budgets.

Other interesting insights from the report:

84% of CEOs believe the role of social networking for their company is to connect with customers; building audiences and brands are secondary.

76% of CEOs said the objective of an “app” is to be part of a bundle of new or enhanced content and services.

The top priority for CEOs remains the evolution of digital and online distribution (56%), followed by creatively differentiating content (44%).

Social and interactive media companies are best positioned among all media and entertainment companies to thrive in the future, according to 59% of CEOs.