Cable profits on the rise

Operators post highest average profit margins

It is good to be a cable guy.

A report released Monday on the media and entertainment business showed that cable operators posted the highest average profit margins between 2006 and 2010, at 38%.

Following closely behind was interactive media, including ad-dependent portals and search engines, at 36%, according to advisory firm Ernst & Young, which measured 89 public global companies over the period. The margins were based on ebitda (earnings before interest, taxes, depreciation and amortization) — a common measure of profits in the biz. Among the weakest on margins were film and tv production, electronic games and music at 11%.

“The data illustrates that despite a difficult operating environment, media and entertainment companies continue to show great resiliency,” said John Nendick, global media and entertainment leader at E&Y. “Additionally, we believe that as advertising and consumer spending continues to rebound, and digital initiatives blossom, improved growth and profitability lie ahead.”

In addition to margins, E&Y looked at growth in ebitda on a dollar basis between 2006 and 2010. In that case, interactive media led the way at 15%, followed by electronic games at 14%. Music posted a dismal negative ebitda growth rates of 5%.

The overall E&Y survey group in media and entertainment posted greater gains in ebitda (5%) in the period over other sectors, including all the other major stock indexes. The Standard & Poor’s 500 Index, for example, saw negative ebitda growth of 13% in the period.