Media business models and strategy

Question 1

Name three segments of the magazine industry market?

Answer 1

1) The Consumer market

A highly concentrated market that has seen a sharp increase in weeklies (particularly those involving celebrity news) and is now competing with newspapers. Gains sales revenue from a mixture of newsstand sales and subscription. Also heavily subsided by advertising.

2) Business/professional market

Offer specialist publications directly marketed to those involved of areas of expertise (Forbes for business, Farmers’ Weekly for agriculture, etc). Known to experiment with digital platforms.

3) Academic market

High quality material aimed at the academic and scientific communities. They have a huge online business.

Question 2

What are media companies worldwide struggling with?

Answer 2

They are struggling to understand and adjust to a wide range of external and internal changes that are altering modes of production, increasing competition, eroding their traditional audience and advertiser bases, altering established market dominance patterns and changing the potential of firms - Picard, 2004

Question 3

What are some of the strategic issues faced by the magazine industry?

Answer 3

Should they make the effort to move online? The internet is both a threat to the industry, as it puts their advertising income in jeopardy, but also is an opportunity when it comes to circulating to a wider audience for a reduced price. Advertising revenue for magazines has remained stagnant, whilst internet advertising has grown by 22% per annum

Question 4

Why are the media industries constantly evolving?

Answer 4

Because external changes are also constant, especially in regards to the field of technology. The change of pace has recently accelerated, due to simultaneous developments in the fields of technology, regulation, and consumer behaviour.

Question 5

What is Hambrick’s 1983 definition of strategy?

Answer 5

“Strategy is situational and the appropriateness of any given approach will depend on the industry context.”

Question 6

What type of context does Kung believe strategy needs to be studied withing?

Answer 6

Kung believes that “strategy needs to be shared within the macro environment, the technological, competitive and consumer context of media organisations.” - 2008

Question 7

Who is Porter?

Answer 7

Porter is a highly influential theorist who believes that the alignment of an organisation with its strategic environment is the essence of competitive strategy

Question 8

What is perceived to be the starting point for analysis of a firm’s environment?

Answer 8

The dynamic of its industry sector, which for media, is incredibly complex. Each industry sector shares some commonalities regarding environment changes, but also faces competitive challenges that are unique to its sector

Question 9

What are the seven core media sectors, and what is the activity that they all share in common?

Answer 9

Book publishing
Newspapers
Magazines
Television
Film
Radio
Music

They all are concerned with the creation of mediated content

Question 10

What is the value chain?

Answer 10

Porter’s value chain (which views value in an economic perspective) assumes that organisation employ a variety of resources to creates products and services.

Question 11

What do ‘successful companies’ manage to do?

Answer 11

They manage to combine resources in a way that creates products and services with more value than the combined value of the resources used to create them - Kung, 2008

Question 12

How does the value chain work?

Answer 12

First, it separates the activities of a firm into sequential stages that range from supply to demand. These stages are referred to as ‘meta tasks’ and are the concerned with the creation and distribution of a firm’s goods and services. The value chain is then analysed, looking at each activity to determine the value it adds to the final product/service. This value is referred to as the ‘margin’.

Question 13

What does the value chain act as a bridge between?

Answer 13

It acts as a bridge between strategy formation and implementation of strategy

Question 14

What are some advantages of making a value chain?

Answer 14

1) It allows each strategically relevant stage to be analysed and the behaviour of costs and potential sources of differentiation to be uncovered
2) Shows business how core processes could be altered to increase value for customers, gain advantage on competitors or create new types of business
3) It helps them analyse convergence in the media industries

Question 15

What has complicated the media value chain?

Answer 15

Digitisation and the rise of the internet. Technological advances, particularly those involved in the distribution of content, encourages the breakdown of the traditional value chain

Question 16

If a competitive advantage cannot personally be created at a particular stage, what should businesses do?

Answer 16

Outsource

Question 17

What is fragmentation of the value chain?

Answer 17

Fragmentation of the value chain is where the meta-tasks of the value chain are unbundled into a number of separate activities. This can lead to the extension of the value chain, particularly at the distribution changes. For example, the newspaper industry doesn’t just distribute physically anymore, but also releases podcasts/online editions). In addition to extending, the value chain can also contract.

Question 18

Describe the market of the magazine industry

Answer 18

1) It is similar to the newspaper business model, in that it is also a dual product market
2) Unlike the newspaper industry, magazines have a much less frequent publication rate, with higher quality productions and a more specific readership
3) It is a very competitive market, that constantly sees new titles crop up. However, most of these titles disappear within three years of starting
4) It is a very resilient media sector, although there is a down-turn in particular titles

Question 19

Why is the magazine industry so resilient?

Answer 19

1) It has a very close relationship with it’s readers
2) It represents unique voices
3) It tailors to niche market segments that are otherwise forgotten by traditional media
4) Glossies are appealing during recessions
5) The high level of visual content is appealing in both print and online formats
6) Strong brands draw readers in
7) They adhere to the demands of special interest communities

Question 20

What are the meta stages of the magazine/new industries?

Answer 20

1) Information gathering
2) Information processing/layout
3) Production and delivery

A gradual shift towards electronic alternatives

Question 21

What does the magazine industry value chain look like?

Answer 21

Content creation and acquisition
Editing and production
Printing and binding
Sales, marketing and circulation
Distribution

Question 22

What is a business model?

Answer 22

Denotes the processes by which products are produced and distributed to consumers. Also, it reflects how financial returns are generated and distributed between participants in the sector.