Market, Technical & Service Convergence in Media: Emerging Industry’s Hourglass Structure

Market, Technical & Service Convergence Market, Technical & Service Convergence in Media: Emerging Industry’s Hourglass in Media: Emerging Industry’s Hourglass StructureStructure

Shariq Faraz: Feb 2010

[email protected]

2

ContentsContents

1. Background & Research Objectives1. Background & Research Objectives

2. Market, Technical & Service Convergence2. Market, Technical & Service Convergence

3. Market Convergence: Expansion Strategies in Int’l Media3. Market Convergence: Expansion Strategies in Int’l Media

4. 4. Contemporary Framework of Int’l Media IndustryContemporary Framework of Int’l Media Industry

5. Market/Service Convergence: Expansion Strategies Regional Media 5. Market/Service Convergence: Expansion Strategies Regional Media

6. Contemporary Framework of Regional Media Industry6. Contemporary Framework of Regional Media Industry

7. Conclusion7. Conclusion

Background: Background: Contemporary Market TrendsContemporary Market Trends

Each year- more media owned by less corporations.Each year- more media owned by less corporations.

Increased consolidation trends (Increased consolidation trends (fusions: mergers & fusions: mergers & acquisitions, joint ventures) in media world.acquisitions, joint ventures) in media world.

Increased conglomeration framework (globally and Increased conglomeration framework (globally and regionally).regionally).

Contemporary Int’l commercial media markets dominated Contemporary Int’l commercial media markets dominated by seven oligopolists. by seven oligopolists.

Economies of scale and scope being exploited as never Economies of scale and scope being exploited as never before.before.

Research ObjectivesResearch Objectives

The purpose of this study is twofold: first to The purpose of this study is twofold: first to identify the identify the key emerging trends key emerging trends in context of market, service and in context of market, service and technical convergence phenomenon in the media technical convergence phenomenon in the media sector.sector.

Second establishing change in industry framework as a Second establishing change in industry framework as a result of the converging trends.result of the converging trends.

Methodology: Desk ResearchMethodology: Desk Research

5

ContentsContents








Convergence is:Convergence is: Blending of industries Blending of industries

and activities in and activities in information societyinformation society

Built upon assumptions Built upon assumptions of synergy and critical of synergy and critical massmass

Based in linking the value Based in linking the value chains of different chains of different products and servicesproducts and services

Market, Technical & Service ConvergenceMarket, Technical & Service Convergence

Types of ConvergenceTypes of Convergence


Convergence effecting media from various frontsConvergence effecting media from various fronts

Production ForcesAutomation, lower cost

of production, digitization , broadband

channel, spectrum abundance, digital

storage

Market ForcesReduce fixed and variable

costs: Lower barriers of entry resulting in too many players in the

market

Social Forces-Audience adoption to technology: Need of

content ‘where and when and how they want’

MediaSustainability

Managerial ForcesM&A activities, Shrinking organisations :Job cuts; reengineering processes


11

ContentsContents








Market Convergence: Expansion Strategies in Market Convergence: Expansion Strategies in International MediaInternational Media

(Industry churn rate of 90%90% since 1980’s)

Significant 7 Mega-corporations inter-relationshipSignificant 7 Mega-corporations inter-relationship

√ √ √ √√

√


Vertical integration strategies (related activities up and down the supply chain are integrated) are actively pursued by media moguls.


Revenue by segments for fiscal 2009

Heavy Repackaging /repurposing of content within the sister brands. Rebroadcasting the same content to get as wide an audience as possible.

Market Convergence: Expansion Strategies Market Convergence: Expansion Strategies International MediaInternational Media

News Corp targets Middle East with Rotana’s 10% stake


19

ContentsContents








All of the supply chain for media are interdependent. No single stage is more important than another i.e. all are interrelated. Performance of every firm involved in the supply chain will be threatened if a bottleneck bottleneck develops (which is currently happening in the industry- see next slides)

Production Packaging

Contemporary Framework of Int’l Media IndustryContemporary Framework of Int’l Media Industry (as a result of market convergence trends(as a result of market convergence trends)

Huge global mega-corporations““Hourglass effect”

Hourglass effect”

SMEs/Freelancers

Bottleneck if one player manages to monopolize any single stage in the value chain.

PackagingDistributionDistribution

Contemporary Framework of Int’l Media IndustryContemporary Framework of Int’l Media Industry (as a result of market convergence trends(as a result of market convergence trends)

Hundreds thousands of small business enterprises/freelancers

Heavy outsourcing of activities

Heavy reliance for sponsorship

Huge global mega-corporations

““Hourglass effect”Hourglass effect”

Emerging ‘Hourglass’ shape of media industries (i.e. many small businesses and some very powerful large businesses, but few medium-sized firms).

Rivals are put in a considerable disadvantage

Bottleneck if one player manages to monopolize any single stage in the value chain.

Other26%

Warner13%

EMI13%

Universal23%

BMG/Sony25%

Global Market share

Contemporary Framework of Int’l Music Contemporary Framework of Int’l Music IndustryIndustry

Contemporary Framework of Int’l Film Contemporary Framework of Int’l Film IndustryIndustry

http://images.google.co.uk/imgres?imgurl=http://userserve-ak.last.fm/serve/252/18275.jpg&imgrefurl=http://www.last.fm/music/Fox%2BSearchLight%2BPictures&usg=__kUNTRDDraWFxffxk9pWsr7CcybM=&h=252&w=252&sz=13&hl=en&start=1&um=1&itbs=1&tbnid=kiG9qv8Rv4BuGM:&tbnh=111&tbnw=111&prev=/images%3Fq%3Dfox%2Bsearchlight%2Blogo%26hl%3Den%26safe%3Dactive%26sa%3DN%26um%3D1

http://images.google.co.uk/imgres?imgurl=http://world-cinema.com.ua/images/stories/fruit/NewLineCinemaLogo2.jpg&imgrefurl=http://world-cinema.com.ua/images/stories/fruit/&usg=__Zo5ud5qxFmxh7uddNOJZDDgZgzI=&h=263&w=440&sz=94&hl=en&start=4&um=1&itbs=1&tbnid=NpfQC437OHNSFM:&tbnh=76&tbnw=127&prev=/images%3Fq%3Dnew%2Bline%2Bcinema%26hl%3Den%26safe%3Dactive%26um%3D1

http://images.google.co.uk/imgres?imgurl=http://www.celador.co.uk/images/index_03.gif&imgrefurl=http://www.celador.co.uk/&usg=__BhcWK62oca-x_QOSJkQvmVcuH5Q=&h=343&w=448&sz=17&hl=en&start=1&um=1&itbs=1&tbnid=88nx3WdLBINg3M:&tbnh=97&tbnw=127&prev=/images%3Fq%3Dcelador%2Bentertainment%26hl%3Den%26safe%3Dactive%26um%3D1

http://images.google.co.uk/imgres?imgurl=http://www.chipandco.com/wp-content/uploads/2009/12/The_WaltDisney_Company-Logo.png&imgrefurl=http://www.chipandco.com/%3Ftag%3Dmarvel-entertainment&usg=__hdvKJgJRsllcPb5EJO2XDdHEBNc=&h=393&w=656&sz=37&hl=en&start=1&um=1&itbs=1&tbnid=rI0kLWM9Sf6jYM:&tbnh=83&tbnw=138&prev=/images%3Fq%3Dthe%2Bwalt%2Bdisney%2Bcompany%2Blogo%26hl%3Den%26safe%3Dactive%26um%3D1

http://images.google.co.uk/imgres?imgurl=http://meatballsonline.com/yahoo_site_admin/assets/images/Paramount_Logo.18352807.jpg&imgrefurl=http://www.meatballsonline.com/&usg=__IbmXvs9RvYvfWT3R_Fl5dF_7vsI=&h=307&w=409&sz=108&hl=en&start=3&um=1&itbs=1&tbnid=thhp3CYBlhdu0M:&tbnh=94&tbnw=125&prev=/images%3Fq%3Dparamount%2Blogo%26hl%3Den%26safe%3Dactive%26um%3D1

http://images.google.co.uk/imgres?imgurl=http://www.mediabistro.com/news/original/00006181-047154.jpg&imgrefurl=http://www.mediabistro.com/news/newsfeed/the_morning_newsfeed_110209_141897.asp&usg=__udpfYOsyxHHILaD0WhBdI3fv4Nw=&h=400&w=400&sz=14&hl=en&start=11&um=1&itbs=1&tbnid=4vmxCWN3r8SeQM:&tbnh=124&tbnw=124&prev=/images%3Fq%3Dnbc%2Buniversal%2Blogo%26hl%3Den%26safe%3Dactive%26um%3D1

http://images.google.co.uk/imgres?imgurl=http://www.marcgunther.com/wp-content/uploads/ge-logo.gif&imgrefurl=http://www.marcgunther.com/2009/11/13/ges-immelt-i-thought-wind-was-a-hula-hoop/ge-logo/&usg=__elREgoQz3uLrAhD-ReJ_ympCge0=&h=299&w=300&sz=20&hl=en&start=2&um=1&itbs=1&tbnid=BzSE_AEDFC6X5M:&tbnh=116&tbnw=116&prev=/images%3Fq%3Dge%2B%2Blogo%26hl%3Den%26safe%3Dactive%26um%3D1

http://images.google.co.uk/imgres?imgurl=http://screenrant.com/wp-content/uploads/miramax-logo.png&imgrefurl=http://screenrant.com/disney-selling-miramax-700-million-robf-43962/&usg=__Cb4UMK9JjibNHVey-MV5ZnOzIJI=&h=320&w=570&sz=32&hl=en&start=7&um=1&itbs=1&tbnid=_OyPp17rddNZcM:&tbnh=75&tbnw=134&prev=/images%3Fq%3Dmiramax%2Bfilms%2Blogo%26hl%3Den%26safe%3Dactive%26um%3D1

http://images.google.co.uk/imgres?imgurl=http://scifiwire.com/assets_c/2009/03/Universal_logo-thumb-400x252-15022.jpg&imgrefurl=http://scifiwire.com/2009/03/universal-is-developing-a.php&usg=__u0T07dG3-hY3LoZt0Lbp1Jv8G78=&h=252&w=400&sz=22&hl=en&start=10&um=1&itbs=1&tbnid=XezEavrsk87xpM:&tbnh=78&tbnw=124&prev=/images%3Fq%3Duniversal%2B%2Blogo%26hl%3Den%26safe%3Dactive%26um%3D1

http://images.google.co.uk/imgres?imgurl=http://fusedfilm.com/wp-content/uploads/2009/03/imagine-entertainment-logo.jpg&imgrefurl=http://www.fusedfilm.com/2009/03/merman-gets-picked-up-by-universal-and-imagine/&usg=__wIVOpn-S2YDl--EyeYHDEWBz1CY=&h=307&w=1088&sz=21&hl=en&start=1&um=1&itbs=1&tbnid=S71SWyuxF6ck8M:&tbnh=42&tbnw=150&prev=/images%3Fq%3Dimagine%2Bentertainment%2Blogo%26hl%3Den%26safe%3Dactive%26um%3D1

http://images.google.co.uk/imgres?imgurl=http://upload.wikimedia.org/wikipedia/en/f/ff/Working_Title_Films_logo.png&imgrefurl=http://en.wikipedia.org/wiki/File:Working_Title_Films_logo.png&usg=__azX5FLbBXRr9ZpHXuuK3J_wk65M=&h=266&w=500&sz=17&hl=en&start=2&um=1&itbs=1&tbnid=RZSgzWdHG7iYpM:&tbnh=69&tbnw=130&prev=/images%3Fq%3Dworking%2Btitle%2Blogo%26hl%3Den%26safe%3Dactive%26um%3D1

http://images.google.co.uk/imgres?imgurl=http://www.mannythemovieguy.com/images/focus%2Bfeatures.jpg&imgrefurl=http://www.mannythemovieguy.com/index.php%3Fm%3D11%26y%3D09%26entry%3Dentry091112-214016&usg=__LoxkhgCWB8OP_7gf6lWVvoIWCQA=&h=257&w=400&sz=15&hl=en&start=4&um=1&itbs=1&tbnid=KzLkJvZed-dPrM:&tbnh=80&tbnw=124&prev=/images%3Fq%3Dfocus%2Bfeatures%2Blogo%26hl%3Den%26safe%3Dactive%26um%3D1

http://images.google.co.uk/imgres?imgurl=http://66.216.93.179/images/Paramount_Vantage_Logo.jpg&imgrefurl=http://66.216.93.179/Widescreen/1031&usg=__DQiBkNpmM8vdo90m95KUXpHl3XI=&h=670&w=1575&sz=139&hl=en&start=1&um=1&itbs=1&tbnid=Xef6Zr05qHazzM:&tbnh=64&tbnw=150&prev=/images%3Fq%3Dparamount%2Bvantage%2Blogo%26hl%3Den%26safe%3Dactive%26um%3D1

A ‘glass ceiling’ or bottle neck seems to make it difficult for small firms to develop into medium or larger-sized businesses

Contemporary Framework of Int’l Contemporary Framework of Int’l Advertising IndustryAdvertising Industry

25

ContentsContents








Market Convergence: Expansion Strategies in Market Convergence: Expansion Strategies in Regional MediaRegional Media

Conglomeration & monetary trends are identical for US and Pan Arab media

“Lot of them will hire a room in Media City with three cameras and have their TV station…but big boys will remain few” Abdlel-Rahman al Rashed-Manager-Al Arabiya as cited in Sakr, 2007

Regional FTA TV growth illustration


1 3 4

2010 Rotana control’s 60%

movies being shown inArab world and 80% of

music business. and contracts with top

100 Arab artists

2005 Rotana collaborates with Al Wataniya Telecom of Kuwait to provide ring tones, video clips on mobile phones to customers in Algeria, Tunisia, Kuwait and Iraq

In 2004 EFG sells all rights through its subsidiary to Rotana

1999 Citicorp buys 20% stake

in EFG- Hermes

2

1993 Al Waleed buys 25% stake in Rotana followed by 48% stake in 2002 and in 2003 took 100% ownership

2000,EFG acquires copyright to 3,200

Arab movies made since 1935

1991 Al Waleed buys stake in

Citicorp: Current stake 5%

2004 Rotana acquires ownership of 3,200 Arabic movies through EFG

1 3 42

Mutual synergies of Mutual synergies of cross media ownershipcross media ownership

2010 Murdoch close to 20% stake in Rotana & LBC SAT

2009 Strategic partnership uplink with Rotana Media Services

1997 Alwaleed second largest stakeholder in News Corp, with 5.7 %shares

2009 Rotan and Fox Int’l signed a US$ 26.7mn content agreement with Walt Disney

Alwaleed has undisclosed stake in Disney


Largest Pay TV subscriber base in the region; recently sold 6 channels of its fleet


Mutual synergies of cross Mutual synergies of cross media ownershipmedia ownership

http://www.artonline.tv/eng_Home/OurPrograms.aspx?ChannelID=122




Subhash Chandra


Regional

M&A activity

http://www.zeeturner.com/about_us/logos/zee_tamil.jpg

VerticalVertical/ cross media growth involves expanding forward / cross media growth involves expanding forward into succeeding stages or backward into preceding stages into succeeding stages or backward into preceding stages in the supply chain.in the supply chain.


Dallah Media Production

Arab Digital Distribution Company

Arab Media Corporation ART Network

Production Distribution Packaging

http://en.wikipedia.org/wiki/File:Adduniverse_logo.png

http://en.wikipedia.org/wiki/File:ART.jpg

Horizontal/Mono-mediaHorizontal/Mono-media expansion strategies where expansion strategies where two firms at the same stage in supply chain or who two firms at the same stage in supply chain or who are engaged in the same activity combine force.are engaged in the same activity combine force.


http://shahed.mbc.net/mediamanager/

8 million videos have been viewed by over three million visitors, of whom 65% are from the Middle East

DiagonalDiagonal or lateral expansion strategies where media firms diversify or lateral expansion strategies where media firms diversify into new business areas. For example, merger between telecom into new business areas. For example, merger between telecom communications operator and TV company communications operator and TV company (New Media platform).(New Media platform).

Service Convergence: Expansion Strategies in Service Convergence: Expansion Strategies in Regional MediaRegional Media

Zain Create, allows Zain's customers to download entertainment from Rotana

Media Group

http://create.zain.com/

Diagonal Diagonal or lateral expansion strategies: collaboration or lateral expansion strategies: collaboration between telecom and media companies between telecom and media companies (New Media platform).(New Media platform).

“The strategic ambition of most of these players is to create vertically integrated businesses that control the gateway across TV, phone and wireless networks, offering customers a single bill, a single brand and a single EPG” Huges, 2003


Diagonal Diagonal or lateral expansion strategies: collaboration between telecom or lateral expansion strategies: collaboration between telecom and media companies. and media companies. (DVB-H platform)(DVB-H platform)


“Ultimately there will be no difference between broadcasting and telecommunications” (Styles:1996)

Diagonal Diagonal or lateral expansion strategies: collaboration between or lateral expansion strategies: collaboration between telecom and media companies. telecom and media companies. (New Media & DVB-H)(New Media & DVB-H)


37

ContentsContents








Hundreds small business enterprises ranging from small SMEs to large network of Freelancers

Heavy outsourcing of activities

Heavy reliance for sponsorship

Huge regional mega-corporations

““Hourglass effect”Hourglass effect”

Contemporary Framework of Regional Media IndustryContemporary Framework of Regional Media Industry (as a result of market convergence trends(as a result of market convergence trends)

AGI Holding

Company

http://www.futuretvnetwork.com/Default.aspx

A ‘glass ceiling’ or bottle neck seems to make it difficult for small firms to develop into medium or larger-sized businesses

Contemporary Framework of Regional TV IndustryContemporary Framework of Regional TV Industry (as a result of market convergence trends(as a result of market convergence trends)

http://blog.jumptv.com/photos/uncategorized/2007/09/04/rotana_logo_for_banner.jpg

http://www.lyngsat-logo.com/tvcountry/ae_1.html

http://images.google.co.uk/imgres?imgurl=http://www.lyngsat-logo.com/logo/tv/oo/orient_tv.jpg&imgrefurl=http://www.lyngsat-logo.com/tv/o_8.html&usg=__C5oaaspHBW4J1rk33aTGiiRr4P0=&h=99&w=132&sz=6&hl=en&start=4&um=1&itbs=1&tbnid=RYIk5B-DCt91OM:&tbnh=69&tbnw=92&prev=/images%3Fq%3Dorient%2Btv%26hl%3Den%26sa%3DN%26um%3D1

http://www.thematv.com/logos/mbc-group.jpg

40

ContentsContents








Conclusion Conclusion

Active converging market expansion strategies Active converging market expansion strategies (market/service/technical) are being undertaken by both Telecom (market/service/technical) are being undertaken by both Telecom and Media companies in the Middle East and Media companies in the Middle East

Because of increased consolidation & concentration in media Because of increased consolidation & concentration in media fuelled further by converging technology, the regional industry is fuelled further by converging technology, the regional industry is emerging in an hourglass structure analogous to its western emerging in an hourglass structure analogous to its western cohorts.cohorts.

Today majority of players in Pan Arab markets represent the Today majority of players in Pan Arab markets represent the burgeoning digital media platform find themselves in the lower half burgeoning digital media platform find themselves in the lower half of the hourglass phenomenon; inasmuch being hugely dependent of the hourglass phenomenon; inasmuch being hugely dependent on big corporate located in the upper half of the hourglass for their on big corporate located in the upper half of the hourglass for their survival. The Big corporate too are hugely dependent on the smaller survival. The Big corporate too are hugely dependent on the smaller companies in the lower half given the heavy outsourcing trend companies in the lower half given the heavy outsourcing trend rampant in the industry.rampant in the industry.

Basic ReferencesBasic References

Arab Television TodayArab Television Today: Naomi Sakr; 2007: Naomi Sakr; 2007

Alwaleed: Businessman, Billionaire, PrinceAlwaleed: Businessman, Billionaire, Prince: Riz Khan; 2005: Riz Khan; 2005

Entertainment Industry EconomicsEntertainment Industry Economics: A Guide for Financial Analysis: A Guide for Financial Analysis : :Harold L. Vogel; 2007Harold L. Vogel; 2007

Media Work (Digital Media & Society):Media Work (Digital Media & Society): Mark Deuze; 2007 Mark Deuze; 2007

Managing Media CompaniesManaging Media Companies: Harnessing Creative Value: : Harnessing Creative Value: Annet Aris, 2005Annet Aris, 2005

Media Management in the Age of Giants: Dennis. F, Herrick; 2003Media Management in the Age of Giants: Dennis. F, Herrick; 2003

The Economics and financing of Media CompaniesThe Economics and financing of Media Companies: Robert G. Picard ;2002: Robert G. Picard ;2002

Rotana signs pact for Disney content;Rotana signs pact for Disney content; Digital Broadcast Middle East; 2010 Digital Broadcast Middle East; 2010 http://issuu.com/itpbusiness/docs/db_84_01012010http://issuu.com/itpbusiness/docs/db_84_01012010

Thank YouThank You

Market, Technical & Service Convergence in Media: Emerging Industry’s Hourglass Structure

Documents

Transcript of Market, Technical & Service Convergence in Media: Emerging Industry’s Hourglass Structure