Entertainment CFOs Focus on Digital Content, Data

Like their counterparts in other industries, the focus of entertainment and media senior financial executives is evolving past a strict look at financial metrics to include the strategic opportunities enabled by digital technologies and advanced data analytics.

Speaking at an EY webinar presented to support an upcoming study of entertainment industry CFO attitudes, Jimmy Barge, CFO of Lionsgate Entertainment Corp., said financial metrics remain important as a common denominator and scoreboard to help unify diverse business units while the finance organization plays a larger role in driving enterprise strategies.

"We're working to to help align everyone around a common strategy," Barge said. "From a finance perspective, there's a heavy focus on data we can utilize to help the organization make the best informed decisions, inform the strategy and go execute. At the end of the day, it's about driving shareholder value, and if you get the other parts right, it will lead to that."

Bernie Dvorak, executive VP and co-CFO of Liberty Global, said as more CFOs focus on revenue generation opportunities, the demands placed on successful finance leaders are changing. "There's innovation and creativity in the CFO's office that perhaps in the past wasn't there," Dvorak said. "There's a changing skill set that we've read about and heard about, and now we're seeing it."

Barge said his organization's chief priority is increasing the quality and availability of financial information throughout Lionsgate, and is upgrading its systems and technology to ensure real-time information is available about assets such as content, distribution agreements, digital rights, release windows and other variables. Ian Eddelson, EY Global Media & Entertainment Assurance Leader, said CFOs' traditional role in managing the organization's balance sheet and supervising controls is still important, but finance executives have a broader strategic mandate.

"If you focus on the strategy and keep the big picture in mind, the results will follow," Eddelson said.

Citing results from the unreleased survey, Eddelson said 65 percent of entertainment industry CFOs said enabling the company to develop a more competitive business strategy was their key success factor. That was followed by meeting or exceeding the company's financial performance goals, at 57 percent, and recruiting developing and retaining talent at 47 percent.

The focus on developing executive talent was stressed by Liberty Global's Dvorak, who his organization has an initiative to identify and develop high-potential executives, and to ensure performance metrics are unified among the company's different operating locations.

Digital Markets

The emphasis on finance organization innovation is especially important for entertainment and media CFOs, as their industry continues to deal with the opportunities and challenges presented by the digital distribution of content.

Lionsgate's Barge, for instance, cited the second movie in The Hunger Games series, which the company made available through 20 digital platforms. He said six of those didn't exist when the first film was released 18 months earlier.

Barge said rapid innovation in the entertainment and technology industries create opportunities, but also risks to business models that can prompt organizations to adapt quickly. Asked about growth opportunities in the survey, EY's Eddelson said CFOs are focusing more on existing or core markets, and demonstrating a reduced appetite for investing in emerging markets. The increased costs and risks associated with distributing content in some emerging markets are shifting entertainment companies' focus to investing in established markets. Despite potential risks, Lionsgate's Barge said China remains a great opportunity for the entertainment industry. Chinese box office revenue, slightly more than a third of U.S. box office sales in 2013, is expected to exceed the U.S. by 2020. In addition, digital distribution is expected to increase those opportunities.

For entertainment companies venturing into international markets, several respondents said they preferred to acquire a local distribution partner, or to distribute their own content, rather than relying on a distribution agreement with a local company. EY's Eddelson said maintaining ownership was perceived as a less risky strategy that offered greater control to content owners.