assignment 2
Discussion questions
What is special about competition in the entertainment & media industry?
What are the biggest threats to Time Warner?
Based on your five forces analysis, what strategies would you recommend?
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What is special about competition in the entertainment & media industry?
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Entertainment & media industry
Dynamic technological landscape: the introduction of new media formats and distribution channels continually provides the industry with new opportunities for creative products
Increasing competition
Frequent M&As is a major growth strategy.
Constantly evolving consumer tastes and preferences
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Source: PwC (2016)
Dramatic Trends in the Media and Entertainment Industry
https://www.youtube.com/watch?v=oTjZnOmApsk
What's Driving Media Consolidation?, 2017, 2 min
http://www.latimes.com/84924462-157.html
Charter announces $55 billion deal to buy Time Warner Cable, 2015, 3m
https://www.cbsnews.com/videos/charter-announces-55-billion-deal-to-buy-time-warner-cable/
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2. What are the biggest threats to Time Warner?
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Threats for Time Warner
Increasing competition
Competitors are becoming stronger, bigger, and more creative.
Consumers’ behaviors are changing
Rapid transition to a direct-to-consumer world
Need to protect content
E.g., Piracy of films
Balancing pitching to ‘Cord cutters’ while not alienating cable operators
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Source: PwC (2016)
Time Warner's Bewkes: Behind the Cord-Cutter Pitch
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Threat of buyers
High
Viewer ratings drive opportunities for profit
Low switching costs
Abundance of offers
Consumers have access to everything
Have far more content to choose from, available to them at any time, in any mix, through many more delivery options and devices
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Threat of suppliers
Generally low but increasing
Supply far exceeds demand
Creators can more readily pursue opportunities outside traditional studios and distribution channels
More ways for content owners to commercialize content
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Threat of new entrants
Low
High entry and exit costs
Disruptive companies have emerged
Deliver fast what users want
Monetize viewership in more advertising-free and ad-light environments
Build their brands at the expense of the studios or networks supplying the shows
High
Relatively low entry for large companies
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Do Time Warner Talks Signal a New Direction for Apple?
RUMOR: Apple Interested in Buying Disney, 2017, 1m
http://www.cbr.com/rumor-apple-interested-in-buying-disney/
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Threat of rivalry
High threat of rivalry
Main competitors: Paramount Pictures Corp.,News Corporation, NBCUniversal, Viacom Inc.,The Walt Disney Company
Companies compete based on product and marketing expenditure
Customer loyalty is difficult to gain
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Netflix's $5 Billion Budget Is Setting Off an Arms Race in Cable
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Threat of substitutes
Moderate to high
New technology allows for different substitutes to become readily available
Many different entertainment outlets are available besides film and TV entertainment (e.g., video games, social networking websites such as Facebook, YouTube, Twitter)
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Time Warner’s competitive responses
“TV everywhere” – viewing of network content on any device for consumers with pay-TV subscriptions
Time Warner is now a co-owner of Hulu, a streaming service whose ultimate goal is to essentially replace traditional cable TV (Aug., 2016)
it has paid $583 million for a 10% stake in Hulu, joining an existing ownership group that includes Walt Disney, 21st Century Fox, and Comcast—each of whom now own a 30% stake.
Spin-offs – Time magazine, Time Warner Cable (2009)
Charter & Time Warner Cable merger
Time Warner & AT&T merger
Will be able to keep up with the digital revolution as part of a wireless giant. For example, they can collect a lot of data about viewers and use that to decide what programs to produce, and sell premium-priced ads that will go to specific people — not just broad demographics (Liberman, 2016)
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Time Warner's strengths after spinoffs | Jeff Bewkes at Ignition 2012 Conference
https://www.youtube.com/watch?v=jUXEhBURxvY
Ted Turner's biggest regret
https://www.youtube.com/watch?v=0NIRtTikCmo
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Pros and Cons of AT&T-Time Warner Merger
Faster innovation: By owning both content and distribution, AT&T expects to create new products and services faster.
Cheaper choices: Some AT&T wireless customers can get pay TV for $10 a month with a credit. Free HBO was added.
Better advertising: AT&T will sell targeted video ads at higher prices, which could reduce total ad spots and improve the viewing experience.
Big data, better content: With more insight into the viewing habits of AT&T customers, content creators may develop more hits.
Next-gen technology: AT&T will be able to ramp up 5G service sooner so more customers can stream its content.
Potential risk of exclusivity or self-dealing: DirectTV might favor Time Warner content, crowding out or refusing to carry alternative and independent programming that viewers might prefer.
Consolidation and risk of higher prices: Historically, consolidation does not tend to lower costs for consumers, partially because that’s not something regulators typically can prescribe as they place conditions on deals.
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Source: NPR (2016), AT&T-Time Warner merger; Dallas Morning News (2017), In AT&T and Time Warner merger, bigger may be better
How the AT&T-Time Warner Deal Came Together, 2016, 3 min
Netflix's Reed Hastings On AT&T-Time Warner Merger | CNBC, 2016, 2 min
https://www.youtube.com/watch?v=3t_pFeE6yJU
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3. Based on your five forces analysis, what strategies would you recommend?
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Recommendations
Aggressively invest in intellectual property to build deep rosters of branded content
Exercise greater control of their rights related to streaming
Offer unique content to create meaningful fan bases, making their networks, brands, shows “indispensible” to distributors and advertisers
Aim at multiple revenue streams
Domestic sales to networks or streaming services, international sales, licensing for video games, consumer products, etc.)
Host paid content live events (e.g., theme parks, live touring attractions)
Reposition as pay-TV bundles resized into “skinny” packages
Create more segmented, affordable, and smaller video bundles to maintain pay-TV subscription rates
Expand third-party distribution opportunities
Establish partnerships with social media sites
Through offerings such as Snapchat’s Discover, Facebook’s Instant Articles, and Apple News, content providers whose output is geared for these digital distributors can publish directly onto their apps.
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Jeff Bewkes Thinks Cable’s Future Is Fine
http://www.bloomberg.com/news/articles/2016-08-02/jeff-bewkes-thinks-cable-s-future-is-fine
Kristen O'Hara Breaks Down Time Warner's Digital Strategy
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