Export proving key to surviving downturn, increasing revenues: Delvinia study

Export has apparently proven a mitgating factor in helping small- and medium-sized interactive media companies overcome an industry downturn, according to a soon-to-be-published report. The Interactive Media Producers Survey 2002 prepared by Delvinia Inc. shows a marked difference in the revenues of companies that export their products and those that produce only for the domestic market. The study was conducted in late 2002 with 250 producers filling out a 27-question written survey. In reaching its conclusion, Delvinia estimates that the total universe of interactive media production companies in Canada - companies that derive a significant revenue from the production of interactive media - is approximately 1,500. In its findings, the report states that 60% of the companies surveyed in 2002 were engaged in export - down from 70% in 2000 and 77% in 1999. On a company average revenue basis, companies with fewer than 100 employees reported a top line 50% larger than companies that didn't engage in export. The additional revenue was likely important as the survey respondents reported a steep decline in revenues in 2002. Between 2001 and 2002, average revenue fell from $2,091,277 to $1,770,496, which represents a drop of 15%. However, the survey notes that when Bell Globemedia and its $60 million in annual revenue is removed from the mix, the gap between revenues in 2001 and 2002 widens even further, to 30%. There was also, according to the report, a 10% decline over the same period in the number of companies reporting more than $500,000 in revenues to 36% of the reporting companies. But, the survey notes, 58% of respondents said business has increased either somewhat or significantly when asked to compare their revenues for 2002 to 2001, which should bode well for next year's survey as 2002 figures are actually based on the companies' last fiscal years. The 2002 survey found, though, that employment in the sector has shrunk among SMEs. The report's authors note: "Particularly troubling are the observations associated with companies of fewer than 100 full-time employees, which make up over 95% of our sample. There was a decline in company size with a reduction of full-time employees by some 30%, a decline in average revenue for smaller firms overall of 46%, and there were fewer start-ups entering the market. Worker productivity has also declined modestly by 7%." Firms streamlining The report notes that companies in the sector also appear to be streamlining their activities. In 2002, Delvinia found that only 39% of companies surveyed offered 10 or more services and only 3% offered more than 15. That is a sharp decline from 2001 when 50% of company respondents offered 10 or more services and 5% offered as many as 15. The types of paid activities remained relatively stable with the exception of webcasting and corporate training, which were both down sharply, and online database development increased significantly. A surge in the deployment of customer relationship management systems in the past year is given as one likely cause for the latter trend. Delvinia reports that with an overall economic slowdown and uncertainty there is an accompanying drop in company innovation, decision cycles related to external expenditure increase, and budgets associated with marketing and technology activities come under closer scrutiny. But, the report says, the potential for yet more export activities, and the possibility that the convergence trend may still pan out, should create hope for a hard-hit industry. "While the traditional media will need time to sort themselves out, Wireless Web and continued expansions into interactive marketing and integration activities will fuel business in the near term," the authors note.

Export proving key to surviving downturn, increasing revenues: Delvinia study

Broadcast | May 15, 2003

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