strategy+business is published by PwC Strategy& Inc.
 
or, sign in with:
strategy and business
Published: May 23, 2005

 
 

Media Synergy: The Sequel

How executives of top media companies are facing up to the challenges of digital media and convergence.

Those three dirty words are back in vogue again — convergence, synergy, and repurposing. Terms that were almost banished from the language of business after the dot-com meltdown are reappearing at media firms. After four years of near-silence on the promise of digitization, formerly gun-shy companies are hoping to spur revenue growth during the current economic recovery by refocusing their growth strategies on new ways to create and distribute media content.

The pace of activity is frenetic. Last year, cable giant Comcast made a $54 billion unsolicited bid for Disney, a proposed marriage of distribution with content. With his recent purchase of DirecTV, Rupert Murdoch has realized his dream of a global media empire with print, broadcast, satellite, and Internet components. Meanwhile, traditional media companies are eyeing dot-coms that have content, as illustrated by Dow Jones’s purchase of CBS MarketWatch and the Washington Post’s acquisition of Salon.

With these and other signs of a synergy renaissance as backdrop, from November 2003 through April 2004 we surveyed the 25 top media companies, ranked by revenue, to find out how widespread the re-embrace of digital content strategies was and which strategies were being adopted. Ultimately, we wanted to answer the question: Is strategic innovation any easier today than it was during the bubble years?

Perhaps our most important finding was that a majority of companies were, indeed, taking convergence seriously. Fifty-six percent of the firms said they had a comprehensive digital strategy across all divisions and departments, whereas 36 percent said they had none.

Through interviews with CEOs and others from strategic planning and business development, we identified four models that capture the most prevalent digital strategies of these companies:

  • Direct or de facto coordination of all in-house Internet and other digital operations at the senior management level. Cable providers most often followed this model.
  • Decentralized Internet and other digital operations with divisional-level control of properties, an approach favored by newspaper companies and the cable networks.
  • Cooperative ventures in which distribution and content are shared among two or more companies, a model favored by entertainment conglomerates and Internet portals.
  • External investments in entrepreneurial ventures, in which the parent company gains access to innovation without full responsibility for operations. Time Warner’s 8 percent stake in Google is an example.

Even those companies that had not yet adopted a digital strategy, or that had adopted only a modest one, conceded that the trend toward digitization of media was unstoppable. The issue they were struggling with, though, was how to earmark investments in digital businesses to keep pace with consumer acceptance of these technologies. By and large, executives seemed unwilling to make big bets on consumers’ changing media habits. They were more open to small-scale experimentation with their Web sites and other digital distribution platforms. Such techniques do not require a huge amount of financial or human capital, but they give companies a stake in the emergence of a viable Internet advertising model and in pay-per-view content. The executives said these questions about digital strategies were uppermost in their minds:

  • Co-opetition. How is competition defined when the presence of numerous channels means that rivals in one realm (CBS and Fox Broadcasting Company) can be partners in another (Viacom cable networks on DirecTV’s lineup)?
  • Customization. What is the model of an “on demand” company that gives customers increasing control over when and how they interact with content?
  • Segmentation. Does the shift from a company’s core distribution platform change the sought-after audience? For example, does the customer who buys a CD have the same profile as a customer who downloads MP3s?
  • Core competency. Should media companies produce content for every available medium, or specialize in a few?
 
 
 
 
Close
Sign up to receive s+b newsletters and get a FREE Strategy eBook

You will initially receive up to two newsletters/week. You can unsubscribe from any newsletter by using the link found in each newsletter.

Close