Managerial Economics
Running head: A CASE STUDY TIME WARNER CABLE 1
A CASE STUDY TIME WARNER CABLE 1
A Case study “Time Warner Cable”
Westcliff University
Bus 505: Managerial Economics
Professor: Nima Salami
Date: August 9, 2020
A Case Study “Time Warner Cable”
Time Warner was founded by the merging of American Television and Communications (ATC) and Time Inc. Time Warner Cable was founded in the 1990s. The company was founded to provide high-quality content by used of different distribution outlets. In early 2000, The company grew significantly when it acquired Turner Broadcasting in 1996. The company would later become one of the largest broadcasting companies in the US and the world. Time Warner owned different entities which enabled the company to dominate the market. Some of the entities owned by Time Warner included CNN, HBO, Turner Broadcasting (CNN, CBS, and TNT), Time Magazine, MLB, and DC comics. Later in 2000, the company merged with AOL which was an internet company in a $250 billion deal. AOL had come to prominence in the 90s and had also been successful in the industry following its provision of internet services and content providers. Half of a American internet users relied on AOL for services by 1997.
In 2000, the dotcom bubble burst which led to plummeting shares of companies that dealt with internet provision. AOL Time Warner posted a loss of $98.7 billion which was attributed to the loss of business as well as accounting irregularities. The business also went down significantly that year due to the economic recession. The merger had compounded the losses and that forced the company to end the merger and continue operating independently by 2009. Later in 2013, the company continued with its operations and dedication to continue operating independently. At that time, the company was aiming to attain sustainability following the losses that it had incurred earlier in the early 2000s.
To attain sustainability the company diversified its operations by separating some of its units. For instance, Time Warner separated publishing from other key functions. The decision was taken to ensure that the company focused on a high rate of growth in products in film and entertainment. As a result of the decisions taken by the company, Financial analysis of the company showed that the revenue margins grew significantly between 2012 and 2013. Income grew by 8.6% in 2012 and by 4.5% in 2013.
Time Warner Business markets
From the case study, the business market for Time Warner is classified into three divisions. The company has three distinct segments that have products for customers. The segments include Television Networks, Film entertainment as well as Publishing. On Networks, the company has products such as Television networks such as CNN, CBS, and others. This is where customers can access news networks. The company has a network of premium pay television services which helps the company to offer customers different types of products. The film is another important segment that provides an important business market for the company. Film entertainment has films, home videos as well as video game production and distribution. Home Box Office (HBO) is one of the companies belonging to the film entertainment segment. The company deals with airing television shows. Another important business market is the distribution segment. Companies such as Warner Bros are owned by Time Warner to produce and distribute television shows, films as well as video games (Bayer & Prince, 2007).
Time Warner has been able to improve its operations by focusing its business segments. It is through the company’s business segments that the company has been able to move from loss-making to generating huge profits. The other important business market for Time Warner is publishing. The company also deals with publishing magazines. Time Magazine for instance has a wide market reach which presents the company with the business market.
Competition for Time Warner and policies
Time Warner has invested in the film entertainment industry where competition has been growing over the years. There have been new entrants in the market offering similar products which have made the company change its strategy to gain a competitive advantage. The key competitors in the industry are in the film entertainment segment. The main competitors include Walt Disney, NBC, Sony, Twentieth-century Fox, Paramount Pictures, and Netflix. The company has, however, been in the market for long which has enabled it to study and understand customers (Rubinfield & Singer, 2001). The company has focused on offering its customers a wide range of products (Evans, 2008). One of the strengths of the company is its brand. Time Warner has been known as one of the best companies in the world. This has enabled the company to use its brand to its competitive advantage. The company has also been able to use the strategy of diversification where products and services can easily reach the customers.
The diversification policy has made the company successful in all three segments. Diversification has allowed the company to invest heavily on different platforms without taking a similar approach. For instance, publishing and film entertainment are two different segments. By using diversification policy, the company has been able to invest heavily in all the segments making it easy to succeed (Evans, 2004). One of the reasons that the company had failed in the past was merging with another company and failing to diversify its operations. Since the failed merger with AOL, the company has invested heavily in digital platforms making it sustainable.
Significant regulatory areas
Various regulatory areas affect the operations of Time Warner. One of the areas is quality management. The company is in an industry where quality plays an important role. To ensure that the company does not lose to the competition, it is important to make sure that quality and high standards are maintained. For instance, the company should make sure that there are standards of movies that ought to be aired on its platforms (Gimpel, 2015). Another regulatory area for Time Warner is process and capacity design. This is an important regulatory area that entails determining the production capacity that is needed by the company to meet the changes in demand for its products and services. Time Warner deals with products that rely on technology and should, therefore, invest in process and capacity design (Crawford et al, 2019). Since some of its products are on high demand such as movies, the company should set its capacity using timelines.
Piracy is another critical regulatory area that affects the decision of the company. The development of the internet has made it easy for counterfeit products including films to be distributed which takes away revenue from a company. This has affected Time Warner, especially in the film entertainment segment. There is high demand and it is easy to pirate films without the knowledge of the company. This affects the decision of the company significantly since it must ensure that the films coming out of the company cannot be pirated (Bensen, 2014). Privacy is another aspect that affects the decision-making process. Time Warner must make sure that customers accessing their services online do not have their private information compromised. Compliance with the law is another aspect that affects the decision of the company. The entertainment industry must comply with laws and regulations. The company must make decisions that are legal to prevent adverse effects from government agencies. Failure to comply with the law and regulations could adversely affect the operations as the license could be revoked.
Technology changes the challenges
Technological advancement in the film and entertainment industry poses challenges to Time Warner. Technology has made it easy for content consumers to access content through digital platforms. For instance, Netflix has been able to create a digital streaming platform that poses challenges to Time Warner. Technology requires the company to invest heavily in digital content which will also change its business model. Another challenge that technology has brought is threats of hacking. Hackers threaten to halt operations of companies such as Time Warner. The company must invest heavily in security to ensure that hackers to not compromise its operations. With movie theaters being affected by development in technology, the company has an important decision to make. To film industry is shifting to digital streaming and that will affect the operations of the company. Technology threatens the business model that has enabled Time Warner to succeed over the years. With demand for streaming of films at movie theaters dropping, Time warner will need to adapt to the new technology as it risks losing to competition.
References
Baye, MR, & Prince, JT (2006). Managerial economics and business. Mc Graw Hill.
Besen, S. M. (2014). Trying to Promote Network Entry: From the Chain Broadcasting Rules to the Channel Occupancy Rule and Beyond. Review of Industrial Organization, 45(3), 275-293.
Crawford, G. S., Lee, R. S., Whinston, M. D., & Yurukoglu, A. (2019). Time Warner and antitrust policy toward vertical mergers. CPI Antitrust Chronicle.
Evans, G. E., & Morton, N. (2004). Empirical Evidence of diminishing Payoff from successive generations of Information Systems. Journal of International Technology and Information Management, 13(3), 5.
Evans, G. E., & Neu, C. (2008). The use of strategic forces to understand the competitive advantages provided by information technology. Journal of International Technology and Information Management, 17(2), 5.
Gimpel, G. (2015). The future of video platforms: Key questions shaping the TV and video industry. International journal on media management, 17(1), 25-46.
Rubinfeld, D. L., & Singer, H. J. (2001). Open Access to Broadband Networks: A Case Study of the AOL/Time Warner Merger. Berk. Tech. LJ, 16, 631.