Tanking share prices, consolidation and the threat of a looming advertising downturn have taken their toll on media companies. But look a little closer and a more complex picture emerges of an industry that can be broadly divided into the digital "haves" and "have nots". For those still relying to a large extent on delivering advertising to mass audiences, the picture is of an industry in the midst of serious structural upheaval, spilling red ink and redundancy slips as it goes.

Increased audience fragmentation, competition from new online and global rivals and, in some cases, poor investment decisions have all impacted on companies as diverse as ITV, GCap, Archant and EMI. The effects are laid bare in the first attempt to compile a definitive list of the performance of the top 100 media companies in the UK.

The OC&C Top 100 Media Index was the result of an in-depth examination of over 150 companies operating in the UK, collating their financial results to rank firms by turnover and produce information on profitability and staffing levels. The study will be repeated on an annual basis to chart the impact of the structural shift in the economics of mainstream media companies.

"Traditional display media - like TV, radio and newspapers - were clearly dealing with digital in 2007 from channel fragmentation to new competition. You can see it in the numbers, in staffing changes and in declining profits," says OC&C partner Paul Zwillenberg.

Television, he predicts, is still some five years away from being hit by the digital revolution with the same force as those sectors that were knocked sideways by its impact around five years ago - music and newspapers. On the other side of the fence are those companies described by OC&C as "digitally hedged", which have either undergone the painful structural transformation required to cope with the digital era, or are well placed to benefit from it.

Classified advertising

Business to business publishing - a long way from the more glamorous end of the media business - went through the sort of structural transformation now facing the radio, television, newspaper and magazine sectors more than a decade ago. By increasingly relying on data services and exhibitions for their revenues, rather than purely making their money from subscriptions and classified advertising, the bigger B2B groups have shown healthy growth over the past few years.

Companies such as Reed Elsevier, publisher of a string of titles including Variety and Farmer's Weekly as well as owning online database Lexis.com, have pursued a range of strategies to expand their revenue streams and create "defensible" positions on the web.

Another sector that has successfully managed the digital transition is marketing services, as shown by the dominant position of the global WPP network of Sir Martin Sorrell (pictured above). Two other marketing services groups, Publicis and Aegis, also appear in the top 20.

The dominance has come after global networks of advertising, marketing, media buying and PR agencies such as WPP moved from a commission-based structure to a fee-based structure and consolidated in a frenzied series of deals. In doing so, they presented themselves as guides through the fog of media fragmentation and inched their way up the value chain. Meanwhile, their global footprint gave them some shelter from challenging local market conditions.

Recorded music, regional newspapers, consumer magazines and yellow pages are described by Zwillenberg as being right at the "sharp end" of the digital revolution today. EMI, standing at No 11 in our table because the vast majority of its revenues come from the UK, is perhaps the best example of the turmoil associated with fundamentally remodelling a traditional business for the digital age.

The prognosis for the regional newspaper industry, which in recent years has seen wave after wave of cost cutting and consolidation as owners battle declining classified revenues and falling sales, is particularly bleak, according to OC&C. With revenues in the sector as a whole declining by more than 25% and profits tumbling by more than 35%. Fergus Jarvis of OC&C said it was "clear that this cannot continue without major structural changes in the sector".

Enders Analysis sounded another alarm last week following recent warnings from Trinity Mirror and Johnston Press that conditions are worsening further, with the sector "on the edge of a cliff", and DMGT also admitted its regional titles were "under pressure".

Premiums are much lower online than in print, largely because of rival specialist websites for property, motoring and recruitment. In any case, the amount they can charge relative to their traditional position in print is far lower. Conversely, despite national newspaper groups also facing huge structural challenges as they battle steadily declining circulations and the migration of key advertising revenues to the internet, OC&C detected some signs of improvement. Collectively, the category recorded a slight increase in revenue growth, although profits declined by around 15%.

Within broadcasting too, there is a clear divide between production companies that are able to leverage their rights to global hit formats around the world and legacy broadcasters dealing with the challenging shift to digital. While consolidation among independent producers is likely to continue, it is those such as Elisabeth Murdoch's Shine, Big Brother producer Endemol and UK consolidator All3Media that are best placed to benefit as formats able to command mass audiences become even more valuable.

Despite the credit crunch and advertising gloom, the impact of private equity money on the sector will also continue to be keenly felt, according to Jarvis. While blockbuster deals such as Nielsen or EMI might be thinner on the ground, he expects to see more activity among those in the bottom half of the top 100 list. "The big and obvious opportunities have been snapped up and they're going down to the next layer. The private equity groups have built up a functionality in the area and there will be a trickle down effect."

The OC&C figures show that profit growth is strongest among the largest companies, although in the main the rise is down to operating efficiencies rather than top-line revenue growth. According to Jarvis, smaller companies tend to be set on a single course and find it more difficult to restructure. That may provide one crumb of comfort for the behemoths that defined the media landscape of the 20th century and are struggling to reinvent themselves for the 21st.

OC&C Strategy Consultants advises leading media and entertainment companies, including GMG. For the full top 100, go to mediaguardian.co.uk. Or for further information, email media@occstrategy.com.