Net Debt / EBITDA
Net debt / EBITDA is the ratio of net debt to EBITDA. It is a measure of the financial leverage of a company.
Guide to Movies and Entertainment KPIs
This guide highlights the key performance indicators for the movies and entertainment industry and where investors should look to find an investment edge. While this guide is not a fully integrated industry primer, as the market leader in granular consensus estimates data, Visible Alpha works with partners and clients to determine the key performance indicators in the movies and entertainment industry. This guide will aid market participants in identifying industry trends and the potential future performance of movies and entertainment companies, by region and service type.
Industry Business Model
Revenue
Broadcasting
Broadcasting companies primarily drive their revenue from TV advertising. The advertising model is based on viewer ratings and the time of day.
Cable Networks
Cable network providers generate a majority of their revenue from affiliate fees and advertising sales. Affiliate fees are carriage fees paid by multichannel video programming distributors (MVPDs) per month per subscriber. MVPDs provide multiple broadcast TV channels on cable or satellite TV and generally work on a subscription-based business model, but they can also offer video-on-demand options. The amount a cable network provider charges the MVPD largely depends on the quality and quantity of content provided.
Cable networks also sell advertisers’ slots in between TV programs. The ability to sell advertising time and the rates that can be charged primarily depend on the size and the nature of the audience that the cable network can deliver to the advertiser.
Streaming and OTT Services
The streaming and OTT services industry generates revenue from streaming content such as movies and TV shows to viewers. This content can either be self-produced or purchased as streaming rights from filmmakers. Companies in the industry generate revenue from their subscribers. OTT players follow one of the three models to generate revenue – SVOD, TVOD, and AVOD.
SVOD stands for subscription video on demand and helps OTT players generate revenue from subscription fees paid by subscribers to view content on their platform. This model is adopted by players such as Netflix and Amazon Prime Video, among others. TVOD stands for transactional video on demand and helps OTT players generate revenue from subscribers who purchase content on a pay-per-view basis. This model is the opposite of SVOD, where subscribers can choose content based on their needs. Key players in this space include Apple’s iTunes, and Amazon Prime Video Store, among others. AVOD stands for advertising video on demand and helps OTT players generate revenue by posting ads on their platforms. Here, companies allow users to view the content for free but with intermittent advertisements. In this ad-based revenue model, AVOD service providers charge a fee to advertisers to place commercials between their content. Examples of this include YouTube and Hulu.
Studio Entertainment
Studio entertainment companies generate revenue by selling licenses and broadcasting rights to different end markets. These include:
- Theatrical Market
- Home Entertainment
- Television Market
- Others, including music groups and live events
The theatrical market comprises companies that produce and distribute short and full-length live-action or animated movies. Companies in the industry generate revenue from distribution rights and a certain percentage of the total revenue that is earned by the theaters after the release of the film.
The home entertainment market comprises studio entertainment companies that release movies under their own motion picture banner or through an independent distribution company and distribute their releases via Blu-ray discs, DVDs, and electronic formats to end consumers for at-home consumption. The source of revenue is the sale of DVDs or Blu-ray discs and licensing titles to video-on-demand (VOD) services for electronic delivery to consumers for a specified rental period. Home entertainment distribution usually starts three to six weeks after a movie’s theatrical release in the U.S. and differs from country to country.
The television market comprises cable and broadcasting networks, television stations, and other video service providers that buy movie licenses from studio entertainment companies. These companies provide content to their viewers on television or through internet-based devices. Here, the studio entertainment company generates revenue through licenses and broadcasting rights.
Theater
The cinema or theater industry generates revenue from the money spent by movie-goers in movie theaters and advertising at the theaters including the on-screen advertisements before the movies. Revenue from food and beverage sales (typically called concessions) is also an important contributor to revenue. Some examples of theaters are AMC Networks, Cinemark Holdings, and PVR Ltd.
For the theater industry, total revenue is the sum of admissions or movie ticket revenue, food & beverage revenue, and other theater revenue. Admission revenue is the largest source of revenue for a theater company. It is calculated as the average number of admissions or the number of tickets sold in a given period multiplied by the average ticket price. Admission revenue also depends on the number of screens in a theater. The more screens in a theater, the higher the ability to generate more admission revenue.
Food & beverage sales are the second largest source of revenue after admissions. Theaters use strategic placement of food and beverage items in theaters to reduce wait time, increase visibility and improve traffic flow. Food & beverage revenue is calculated as attendance multiplied by concession sales per patron sold in a theater.
Other theater revenue includes revenue earned from on-screen advertisements before the movies, ads inside the movie theater, income earned from gift cards and package ticket sales, private theater rentals, and more.
Music
Within the music industry, music producers or publishers mainly focus on selling, marketing, promoting, and licensing recordings of musical compositions. A major revenue source for production companies is recording and publishing music. Recorded music revenue is the sum of digital, physical, and licensing music revenue.
For music streaming companies like Apple Music and Spotify, a key metric reported is monthly active users (MAUs). MAU is used by analysts to identify the number of unique users on a company’s platform. Another key metric for music streaming companies is average revenue per user (ARPU). ARPU is the revenue generated per unit or user by a company. ARPU is calculated as total revenue divided by the number of subscribers or users. ARPU is a unit pricing factor and is measured monthly, quarterly, or annually.
Movies and Entertainment Business Models
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Expenses
Cable Networks
Some major expenses for the cable network industry are:
- Programming costs
- Retransmission costs
- Labor and overhead costs
Streaming and OTT Services
Some major expenses for the streaming and OTT service industry include:
- Cost of sales – Amortization of content assets accounts for a majority of the cost of sales
- Expenses directly associated with the acquisition, licensing, and production of content including payroll, copyrights, and miscellaneous production-related costs, among others
- Marketing expenses
- Technology and development expenses
- General administrative expenses
- Depreciation & amortization (D&A) expenses
- Other operating expenses
Studio Entertainment
A major expense for studio entertainment companies is production costs. Production costs include crew wages, production design, live set and studio costs, costumes, catering, travel, and accommodation. Apart from production costs, equally important are advertising and marketing expenses before and during theatrical releases.
Theater
Some major expenses for the theater industry are:
- Film exhibition costs
- Food and beverage costs
- Rental expenses (lease)
- General and administrative expenses, including salaries and wages
- D&A expenses
- Other operating expenses
Music
Some major expenses for the music industry are:
Music Publishing
- Artist costs
- Licensing and content costs
- Salaries and other expenses
- Product costs
- Marketing and promotional expenses
Music Streaming
- Salaries and other expenses
- Product costs
- Marketing and promotional expenses
Profitability
Investors in the movies and entertainment industry evaluate the profitability of companies by looking at EBITDA margin (%), operating margin (%), and net margin (%).
- EBITDA margin: EBITDA (earnings before interest, tax, depreciation, and amortization) margin measures a company’s operating profit (before depreciation) as a percentage of revenue
- Operating margin: Operating margin is a profitability ratio that measures the revenue of a company after covering all operating and non-operating expenses
- Net margin: Net margin measures how much net income or profit a company generates as a percentage of revenue
Some other key metrics and ratios that investors look at include:
- Capex to sales: Capex to sales ratio compares a company’s total sales to its investments in property, plant, equipment, and other capital assets. The ratio demonstrates how aggressively a company reinvests its revenue into productive assets
- Debt to EBITDA: The debt-to-EBITDA ratio compares a company’s overall commitments, including debt and other liabilities, to the real cash it generates and exposes whether or not the company is capable of paying its debt and other liabilities. When investors look at a company’s debt-to-EBITDA ratio, they try to figure out how well it can pay off its loans
- Free Cash Flow (FCF): Free cash flow is the cash a company generates after considering cash outflows or operating expenses and capital expenditures
Finally, to evaluate valuation, analysts rely on EV/EBITDA, price/earnings (P/E), price/sales (P/S), and price/book value (P/B) multiples for relative value comparisons.
Key performance indicators (KPIs) are the most important business metrics for a particular industry. To gauge market expectations for the movies and entertainment industry, whether at a company or industry level, some industry KPIs to consider are:
Overall Movies and Entertainment
Streaming and OTT Services
Theater
Music
Publishing
Streaming
Visible Alpha’s Standardized Industry Metrics
To understand market expectations for the movies and entertainment industry, a key information source is sell-side analyst estimates and consensus forecast data. The buy-side, sell-side, and public companies leverage this type of data to conduct competitive analysis, a type of analysis conducted by professional analysts that involves comparing standardized metrics of one company with those of similar companies. Because companies report metrics differently – and sometimes report on different metrics altogether – standardizing the key metrics for each company can be a cumbersome process.
Visible Alpha Insights includes analyst data, company data, and industry data at a level of granularity unparalleled in the market. Our industry data – Standardized Industry Metrics – enables market participants to quantify and compare market expectations for companies across 150+ industries.
Data as of January 2023
78
Global Tickers
500
Current Analyst Excel Models
224
Proprietary line items in our standardized financials data
74
Contributing Brokers
691
Total standardized line items
467
Proprietary line items in our standardized operating metrics data
Visible Alpha offers 12 movies and entertainment industry-related comp tables, comparing forecasts for key financial and operating metrics, to make it easy to quickly conduct relative analysis, whether you are interested in looking at key values for global companies, Americas, or Europe. Every pre-built, customizable comp table is based on region, sub-industry, or key operating metrics.
Broadcasting
- Nexstar Media Group, Inc. (NXST_US)
- HT&E Ltd (HT1_AU)
- Sinclair Broadcast Group, Inc. (SBGI_US)
- TEGNA INC (TGNA_US)
- Gray Television, Inc. (GTN_US)
- EW SCRIPPS CO THE-A (SSP_US)
- Corus Entertainment Inc (CJR_CA)
- Audacy Inc (AUD_US)
- BEC World (BEC_TH)
Streaming and Over-the-Top (OTT) Services
- NETFLIX, INC. (NFLX)
- The Walt Disney Company (DIS)
- AMAZON.COM, INC. (AMZN)
- Comcast Corporation (CMCSA)
- Paramount Global (PARA_US)
- World Wrestling Entertainment, Inc. (WWE_US)
Theater
- AMC Networks Inc (AMCX)
- Cineworld Group (CINE_UK)
- CINEMARK HOLDINGS INC (CNK_US)
- PVR Limited (PVR_IN)
- Inox Leisure Ltd (INOL_IN)
- Wanda Film Holding Co Ltd (002739_CN)
Cable Network
- Comcast Corporation (CMCSA)
- Fox Corporation (FOX)
- AMC Networks Inc (AMCX)
- Lions Gate Entertainment Corp. (LGF_US)
- Vivendi SA (VIV_FR)
- Television Francaise 1 (TFI_FR)
Studio Entertainment
- Lionsgate (LGF_US)
- Paramount (PARA_US)
- Walt Disney Pictures (DIS)
- Universal Pictures (CMCSA)
Music
Publishing
- Warner Music Group Corp (WMG_US)
- Sony Corp (6758_JP)
- Universal Music Group N.V. (UMG_NL)
Streaming
- Spotify Music (SPOT_US)
- Apple Music (AAPL)
Industry KPI Terms & Definitions
Visible Alpha offers an innovative, integrated experience through real-time, granular consensus estimates and historical data created directly from the world’s leading equity analysts. Using a subset of the below KPIs, this data can help investors hone in on the key drivers of companies to uncover investment opportunities.
Overall Movies and Entertainment
Net Debt / EBITDA
Net debt / EBITDA is the ratio of net debt to EBITDA. It is a measure of the financial leverage of a company.
Capex / Sales
Capex to sales measures the amount of capital expenditures incurred as a percentage of sales (revenue).
Free Cash Flow (FCF)
Free cash flow (FCF) is the cash a company generates after considering cash outflows.
Net Margin
Net margin is net income/(loss) divided by total revenue.
EBITDA Margin
EBITDA (earnings before interest, tax, depreciation, and amortization) margin measures a company’s operating profit (before depreciation) as a percentage of revenue.
Operating Margin
Operating profit per one dollar of revenue. Calculated as operating profit divided by total revenue.
Streaming and OTT Services
Gross Addition
Gross addition is the total number of new subscribers added by a company before the adjustments made for the cancellation of service. It portrays a true picture of the actual number of subscriber additions made by a company over a given period.
Disconnects
Disconnects are the number of subscribers who cancel or choose not to renew or extend their subscription over a given period.
Churn Rate
Churn rate is the measurement of subscribers who choose not to renew their subscription or cancel it. It is measured in percentage and is calculated for a specific period (monthly, quarterly, or annually). Churn is calculated as the number of disconnected subscribers divided by the number of beginning subscribers for that period.
Net Addition
Net addition is the number of new subscribers that a company has after deducting the churn (disconnects) from the gross additions for a particular period.
Ending Subscribers
Ending subscribers are the number of subscribers a company has at the end of a given period. It is calculated by adding net additions to the existing subscribers a company has at the beginning of that period.
Average Subscribers
Average subscribers are the average number of subscribers a company has in a given period. It is computed by taking the average number of beginning and ending subscribers for that period.
Average Revenue Per User (ARPU)
ARPU, short for average revenue per user, is the revenue generated per unit or user by a company. ARPU is calculated as total revenue divided by the number of subscribers, users, or units. ARPU is a unit pricing factor and is measured monthly, quarterly, or annually.
Music Publishing
Recorded Music Revenue
Recorded music revenue is the revenue generated from the creation, recording, and distribution of songs and albums.
Music Publishing Revenue
Music publishing revenue is the revenue generated from the promotion and monetization of musical compositions. Music publishers ensure that songwriters receive royalties for their compositions, and also work to generate opportunities for those compositions to be performed and reproduced.
Music Streaming
Net Addition
Net addition is the number of new subscribers that a company has after deducting the churn (disconnects) from the gross additions for a particular period.
Monthly Active Users (MAU)
Monthly active users (MAU) refers to the number of unique subscribers of a company within a month.
Average Subscribers
Average subscribers are the average number of subscribers a company has in a given period. It is computed by taking the average number of beginning and ending subscribers for that period.
Average Revenue Per User (ARPU)
ARPU, short for average revenue per user, is the revenue generated per unit or user by a company. ARPU is calculated as total revenue divided by the number of subscribers, users, or units. ARPU is a unit pricing factor and is measured monthly, quarterly, or annually.
Theater
Number Of Theaters
Number of theaters is the actual count of theaters a company owns and operates in a particular region.
Number Of Screens
Number of screens is the total number of screens in a theater used for showcasing movies to paying audiences. These screens can be digital or non-digital.
Total Attendance
Total attendance is the total number of paying audiences that come to a movie theater in a given period.
Attendance Per Average Screen
Attendance per average screen is the total number of paying audiences per average screen in a theater.
Average Ticket Price
Average ticket price is the average price of a ticket that patrons pay at the cinema or theater in a given period.
Average Concession Per Patron
Average concession per patron is the average revenue received from the sale of food & beverage in a given period per paying customer.
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Guide to Movies and Entertainment KPIs for Investment Professionals
This guide highlights the key performance indicators for movies and entertainment and where investors should look to find an investment edge, including:
- Movies and Entertainment Business Model & Diagram
- Key Movies and Entertainment Metrics PLUS Visible Alpha’s Standardized Industry Metrics
- Available Comp Tables
- Industry KPI Terms & Definitions
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