Ernst & Young Says Mexico Has Some of the Highest Earning Potential in Entertainment, Online Media
While the U.S. still claims the highest earning potential for both entertainment companies and online media, emerging markets like Mexico, India, China and Russia are catching up, reports Ernst & Young, the world's leading business management consultants.
A rapid increase in Internet penetration has sparked the growth. Two billion broadband connections are expected by 2016 in the emerging markets, according to Ernest & Young. Smartphone shipments to the emerging markets will also double between 2014 and 2018.
Mexico is a difficult market to enter for foreign companies, according to the report, because it has "a higher perception of bribery and corrupt practices." Media and entertainment companies endure a higher risk for fraud. For example, the country's smartphone penetration is only 21 percent, which is significantly lower than other Latin American countries like Brazil and Argentina.
Mexico's per capita consumer spending is $11,000 per person-the highest among emerging markets in the study.
China is considered the top emerging market for online media companies with its 1.36 billion population and expected 500 million wireless broadband connections by 2016, but it regulations make it a difficult market to penetrate. U.S. tech giants Facebook and Google have been blocked or restricted, for example.
India's limited smartphone and broadband penetration make it a challenge for online media companies. Telecoms are rolling out 4G service, but Ernst & Young says the country will not generate significant online advertising revenue anytime soon, especially when compared to other emerging markets. It is expected to reach $1 billion in online advertising revenue next year while China is predicted to generate $23 billion.
What makes India promising is its 300 million wireless broadband connections by 2016 and youngest average age (29) by 2020, which results in long-term growth opportunities.
Russia has higher penetration rates for both smartphones and broadband, but it ranks the lowest in political stability and it has the highest level of digital piracy.
Foreign companies have been instrumental in developing media in Russia since the 1990s. They own stakes in hundreds of television stations, newspapers and magazines. Last fall, Russia enacted a law limiting foreign ownership of media, forcing them to sell part or all of their holdings by 2017.
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