The future of digital media is in emerging markets like China and India, according to a report from EY. The number of young, tech-savvy consumers in those countries make them ripe for investment by media and entertainment companies, EY says.

Mature markets still lead the way in digital earnings potential, with the United States ranked number one, followed by Japan, Germany, and the United Kingdom. EY assessed digital markets in terms of both their benefits and cost-attractiveness.

But there are “significant digital growth opportunities” in emerging markets, according to the report, which ranks China at number five and India at number nine.

“Emerging markets are primed for accelerated digital media adoption,” John Nendick, global media & entertainment leader at EY, said in a news release. “Many of these markets have a large number of young, tech-savvy consumers with rising earnings potential. They are also ‘mobile first’ with cheap smartphones and the rollout of 3G and 4G infrastructure rapidly coming together to democratize online access.”

According to Nendick, the number of broadband connections in emerging markets will be two billion by 2016, nearly twice that of the mature markets, and smartphone shipments to emerging markets are expected to double between 2014 and 2018.

The report noted that all won’t necessarily be smooth sailing in emerging markets. China, for example, has “restrictive caps on foreign participation” that may limit growth opportunities. In India, fraud, corruption, and the complexity of owning and operating a business “have made it problematic for overseas investors to realize value.”

“In emerging markets, challenges frequently are around business risks — ease of doing business, ownership restrictions, and copyright protection — and China is no exception,” EY warns.

Russia ranks as the tenth-most attractive digital market, with the report noting it has 87% broadband and 50% smartphone penetration but recently introduced significant restrictions on foreign ownership of mass media.

“The country’s digital media record also gives pause,” EY says, referring to laws that allow the government to block websites with no explanation and regulate bloggers with more than 3,000 users.

Featured image: Thinkstock

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